Local commercial banks have cut interest rates on gold deposits as they are struggling to find an outlet for current deposits, local news website VnExpress reported Thursday.

Banks said that although lending rates have dropped sharply to only around 3 percent, clients had refused to accept the risk of price fluctuations and many were not taking gold loans.

Ho Chi Minh City-based Eximbank said it had lowered gold deposit rates to as low as 0.07 percent a year in an attempt to stop deposits from growing.

Other banks, including Dai A and Asia Commercial Bank, have also cut their rates to 0.05-1.2 percent only.

Viet A Bank said its gold deposits have fallen since the beginning of the year but the bank was still finding it hard to deal with the remaining amount, estimated at 30 percent of its total assets. As a result, it plans to slash rates further.

Meanwhile, state-owned Agribank, the country's largest bank by assets, has stopped accepting new gold accounts since Monday last week.

Nguyen Thanh Truc, director of Agribank's gold trading arm, said the move was made after the State Bank of Vietnam expressed its intention to ban all gold loan and deposit schemes in the country.

Although the central bank is still considering such a ban, bankers said it is highly likely that the ban would be imposed, according to VnExpress.

Huynh Trung Khanh, vice chairman of the Vietnam Gold Business Association and a consultant to the World Gold Council, said local people are holding 400-500 tons of gold as savings, 10-20 percent of which is deposited to banks.

Khanh said gold is a lucrative business for banks, accounting for up to 50 percent of their annual profits. Banks often attract gold deposits at low rates, then they sell the gold and offer dong loans at high rates, he said.